financial reporting to improve governance and build trust · • kahf, m. (1987) “the principle...
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Financial reporting to improve governance and build trust:
Developing countries’ perspective
NIDA NAEEM, CHAIRPERSON, SUBCOMMITTEE FOR THE PUBLIC SECTOR, ACCA
PAKISTAN
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Quality of governance
DEVELOPED COUNTRIES Developmental orientation of political leadership Established systems Functional check & balances System mutually reinforcing and self-correcting Knowledgeable and vigilant public
DEVELOPING COUNTRIES Political leaders following powerful private interests Weak or absent systems Check and balance institutions bypassed Uneducated public
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CASE STUDY: ZAKAT
1. Does the Pakistani public trust its government for effective Zakat administration?
2. Is disclosure of financial reports a significant factor in winning the public’s trust?
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ZAKAT
• Zakât is a portion of one’s wealth that must be given to the poor and needy
• In Islam, it is obligatory for all those who are financially able
• Zakat constitutes a big welfare fund in Pakistan
• Can be given to government’s programme OR privately
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Globally = 40% In Pakistan (2009) = 60%
% of population living under $ 2 a day
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• Pakistan leads South Asia in philanthropic giving as % of GDP.
• Most funds disbursed privately
PHILANTHROPIC NATION
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• Patron’s integrity, charisma and fanfare
• Media portrayal
• Observation of achievements
REASONS FOR PUBLIC’S PREFERENCE FOR PRIVATE CHARITY
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Audited financial statements of SKMCH are publicly available.
But not for EDHI: the largest private charity receiving organisation in Pakistan.
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Edhi has strong media and civil society support based on his achievements on ground.
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Public perception affected by:
Non financial indicators
× Financial reporting
OBSERVATIONS FROM CASE STUDY
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The case for investing in financial reporting improvements must be based on evidence
of its impact on public trust…
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Systems
Better Governance
Visible improveme
nt on ground
Enhanced public trust
Common Man
Improvement
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How will improved financial reporting affect public perception?
EXPERIENTIAL • Observation • Experiences
PERSONAL • Values & Beliefs • Education • Ability to interpret
EXTERNAL INFLUENCES Media Word of mouth Political affiliations
Educate users
Improve financial reporting
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• Research from countries which have advanced public financial reporting systems is required
– to prove link between improved financial reporting and enhanced public trust
– in order to make a stronger case for FR improvement initiatives in resource strapped developing countries.
• Reporting formats should include non-financial indicators to meet users needs.
KEY MESSAGES
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References • Naeem, N. (2013) “Lessons from Pakistan”. Accounting and Business Magazine, International
edition, June 2013: ACCA.
• Pradhan, S. (2006) “Improving governance in developing countries”. Available from: <www1.worldbank.org/publicsector/anticorrupt/.../SanjayPradhan.ppt> [Accessed 27 November 2013].
• Khan, G.M. (2013) “Literacy and Pakistan” [online]. Available from: http://x.dawn.com/2013/05/22/literacy-and-pakistan/ [Accessed 28 November 2013]
• Klugman, J., Human Development Report 2009: Overcoming barriers: Human Mobility and Development. 2009, United Nations Development Programme.
• Income share held by highest 10%. Indicators 2008 [cited 2012 December 14]. Available from: http://data.worldbank.org/indicator/SI.DST.10TH.10.
• Income share held by lowest 10%. Indicators 2008 [cited 2012 December 14]. Available from: http://data.worldbank.org/indicator/SI.DST.FRST.10.
• Poverty in Pakistan. Socio-Economic Issues in Pakistan 2012 30 November, 2012 [cited 2012 December 14]. Available from: http://en.wikipedia.org/wiki/Poverty_in_Pakistan.
• The World Factbook - Pakistan. The World Factbook 2012 5 December 2012 [cited 2012 December 13]. Available from: https://www.cia.gov/library/publications/the-world-factbook/geos/pk.html.
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References • Kahf, M. (1987) “The principle of socio-economic justice in the contemporary fiqh of Zakah”.
• Ahmed, H. (2004) “Role of Zakat and Awqaf in Poverty Alleviation”.
• Nasim Shah Shirazi et al. (2009) “Prospects of Poverty Elimination through Potential Zakat Collection in OIC-member Countries”: Reappraised.
• Candland, C. (2011) “Faith and Philanthropy in Pakistan”. Guest Lectures 14 June 2011 [cited 2012 14 December]. Available from: http://www.ahkrc.net.pk/christopher-candland.html.
• Bank, T.W., (1970) “Pakistan: A Profile of Poverty”.
• Shirazi, N.S. (1996) “Targeting, coverage and contribution of Zakat to households' income: The case of Pakistan”. Journal of Economic Cooperation Among Islamic Countries: 17(3-4), p. 165-168.
• Al-Abidin, T.Z., (2003) “The Disbursement of Zakah”. Islamic Studies: 42(1), p. 126-136.
• Bonbright, D. & Azfar, A. (2000) “Philanthropy in Pakistan: A report of the Initiative for Indigenous Philanthropy”. Aga Khan Foundation, Pakistan.
• Government of Punjab (2012) “Zakat and Ushr Department” . Available from: http://www.Zakat.gop.pk [Accessed 28 November 2013].
• AFP (2012) “GEO-TV: Rs 8,500 bn corruption mars Gilani tenure”.